Hyper-growth stock Nvidia Corporation (NASDAQ:NVDA) finally stepped up to the earnings plate on Thursday, Feb. 9. The global technology company sailed past expectations, beating both revenue and earnings estimates. Volatility lovers hoping for a massive price gap for NVDA stock should prepare to be disappointed. The Street’s reaction in Thursday’s after-hours trading was much ado about nothing.
After a knee-jerk tumble following the earnings release, NVDA shares have rallied back and came out 3% positive at the opening bell.
Given Nvidia stock’s tremendous gains this year — and all the hype surrounding its earnings growth — posting a number that was sufficient in keeping shares aloft is a win.
On the price chart front, there’s nothing not to like about Nvidia. It just tagged a new all-time high at $120.92 on Tuesday. And the importance of such an event can’t be understated. It means investors were willing to pay a price for shares that no one has ever had to pay before. It means each and every person on the planet owning NVDA stock is sitting with a winning position.
And, yes, it means any poor soul unfortunate enough to be short this rocket ship just saw their pain intensify to new heights.
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Throw it all together, and you have an environment where shareholders lack the motivation to sell, and short sellers have the motivation to buy in spades.
That’s bullish, friends.
How to Trade NVDA Stock After Earnings
With Nvidia Corporation’s Q4 earnings passing muster, there is little reason to bet against the beast here. So let’s explore a high-odds option trade.
If you’re willing to bet the stock’s price trend stand firm in the face of any unexpected profit-taking over the coming months, then consider selling a bull put spread. The post-earnings volatility crush will undoubtedly depress option premiums from their elevated pre-earnings levels. But I suspect we’ll still be able to sell out-of-the-money puts for an acceptable premium.
Sell the Mar $105/$100 bull put spread for 50 cents or better. The max reward is limited to the initial credit and will be captured if NVDA stock sits above $105 at expiration.
The max risk, and thus cost, is $4.50. You will lose this if the stock falls below $100 by expiration. To minimize the loss, consider bailing if NVDA shares tumble beneath $105.
As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.
